Yen Drops for Seventh Day, Franc Depreciates as Data Seen Backing Recovery

The yen headed for its longest losing streak against the dollar since July 2005 and the Swiss franc declined as speculation global growth is proving robust boosted demand for higher-yielding assets.

Japan’s currency dropped to a 10-month low against the euro on speculation the Bank of Japan will keep interest rates on hold as it deals with the impact of the nation’s March 11 earthquake while the European Central Bank begins a round of increases. South Korea’s won had its biggest weekly gain this year after a gauge of Chinese manufacturing accelerated and before a report that economists said will show U.S. employers added jobs last month.

“In general, world economic growth is quite strong,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “The negative impacts on Japan’s debt levels from the earthquake are beginning to hit the yen.”

The yen depreciated 0.7 percent, a seventh straight decline, to 83.69 per dollar as of 7:25 a.m. in New York, after reaching 83.74, the weakest since Feb. 17. Japan’s currency slid 0.7 percent versus the euro to 118.45, after touching 118.67, the least since May 13. The euro traded at $1.4155 from $1.4158.

The yen weakened against all 16 of its major counterparts tracked by Bloomberg. It extended its drop against the dollar into a second quarter after losing 2.4 percent in the three months through yesterday, the sharpest quarterly slide since the end of 2009. The currency strengthened to a record 76.25 per dollar on March 17, prompting the Group of Seven nations to jointly intervene in foreign-exchange markets the next day for the first time in more than a decade.

Tankan Survey

Large Japanese manufacturers forecast on average that the yen will trade at 84.20 per dollar in the year through March 2012, according to the Bank of Japan’s Tankan survey released today. Almost three quarters of the responses to the survey came by March 11, the day the magnitude-9 earthquake and ensuing tsunami struck the country.

U.S. employment rose for a sixth month, increasing by 190,000 in March, according to a Bloomberg News survey of economists before the Labor Department report today. China’s Purchasing Managers’ Index increased to 53.4 in March from 52.2 in February, the first rise in four months.

The Dollar Index increased for the first time in three days, adding 0.3 percent. The dollar traded above its 200-day moving average against the yen for the first time since June.

‘Hawkish’ Market

Federal Reserve Bank of Richmond President Jeffrey Lacker said yesterday the central bank should review whether to reduce its planned purchase of $600 billion in Treasuries, a program known as quantitative easing, because of improving economic data. New York Fed President William Dudley, Philadelphia Fed President Charles Plosser and Dallas Fed President Richard Fisher are scheduled to speak today.

“I suspect the market will get quite hawkish on the Fed,” before the meeting of policy makers on April 27, said Geoff Kendrick, head of European foreign-exchange strategy at Nomura Holdings Inc. in London. “The euro is getting closer to a near- term top for now” against the dollar, he said.

The euro snapped a three day run of advances against the dollar today, after strengthening 5.8 percent last quarter.

The shared currency was set for a third weekly advance against the yen after ECB President Jean-Claude Trichet signaled on March 3 that he may raise rates as soon as this month.

Euro, Won

The central bank will increase its main refinancing rate by 25 basis points to 1.25 percent on April 7, all but one of 50 economists surveyed by Bloomberg estimate.

“We are broadly constructive on the euro this year, especially as Trichet has now primed the markets for imminent interest-rate hikes,” Morgan Stanley analysts Tim Davis and Calvin Tse wrote in a research note yesterday. “Rate differentials should increasingly play in the euro’s favor.”

The euro has risen 3.3 percent against the yen in the past five days, after adding 8.5 percent in the quarter that ended yesterday.

Ireland said yesterday it won’t force losses on senior bondholders, even after revealing that it may need to inject 24 billion euros into the financial system.

The Swiss franc extended a decline after the SVME Purchasing Managers’ Index fell to 59.3 for March from 63.5 in February when adjusted for seasonal swings, according to Zurich- based Credit Suisse Group AG. That’s the lowest since February 2010. Economists forecast a drop to 62.5, the median of seven estimates in a Bloomberg News survey showed.

Franc Falls

The franc depreciated 0.3 percent to 1.3053 per euro. It was lower against all its 16 most-traded counterparts apart from the yen, including a 0.4 percent decline versus the dollar to 92.21 centimes. The franc’s slide against the euro took it to the weakest level since Feb. 16.

The South Korean won appreciated as the improved outlook for the global economy boosted confidence in the country’s assets. Foreign investors increased their holdings of Korean stocks for a 12th day, the longest run of net purchases this year, as the Kospi Index of the nation’s shares climbed 3.4 percent during the period.

“Global stocks, including South Korea’s, have been performing well on expectations for an economic improvement,” said Ha Jun Woo, a currency dealer at Daegu Bank in Seoul. “Stock inflows and the trade surplus are supporting the won.”

The won rose to 1,091.20 per dollar from 1,096.93, for a 2.1 percent gain for this week.

To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net.

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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